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Allied Merchandisers was organized on May 1. Macy Company is a major customer (buyer) of Allied (seller) products.
May 3 Allied made its first and only purchase of inventory for the period on May 3 for 1,000 units at a price of $10 cash per unit (for a total cost of $10,000).
May 5 Allied sold 500 of the units in inventory for $14 per unit (invoice total: $7,000) to Macy Company under credit terms 210,n60. The goods cost Allied $5,000.
May 7 Macy returns 50 units because they did not fit the customer's needs (invoice amount: $700). Allied restores the units, which cost $500, to its inventory.
May 8 Macy discovers that 50 units are scuffed but are stili of use and, therefore, keeps the units. Allied gives a price reduction (allowance) and credits Macy's accounts receivable for $300 to compensate for May 15 Allied receives payment from Macy for the amount owed on the May 5 purchase; payment is net of returns, allowances, and any cash discount.
Use the above informations, analyze each transaction by indicating its effects on the income statement-specifically, identify Ythe accounts and amounts (including + or -) for each transaction.
\table[[Income Statement Components,May 3,May 5,May 7,May 8],[Increase/Docrease,Amount,Increase/Decrease,Amount,Increase/Decrease,Amount,Increase/Decrease,Amou],[Sales,,,,,,,,],[Sales discounts,,,,,,,,],[Sales retums and allowances,,,,,,,,],[Net sales,,,,,,,,],[Cost of goods sold,,,,,,,,],[Gross profit,,,,,,,,]]
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